Stablecoin Transactions Matched Visa’s Might in 2022, Settling Over $11 Trillion in Value

By 0xGorki 08/28/23 1:09 AM

In an era marked by the rapid evolution of financial technology, stablecoins have emerged as a potent force, fundamentally reshaping the landscape of non-speculative transactions. According to a groundbreaking report by European hedge fund Brevan Howard, stablecoins have made formidable inroads into the payments sphere, offering a reliable and efficient means of value transfer.

The Brevan Howard report, titled “The Relentless Rise of Stablecoins,” underscores the remarkable growth of stablecoins as a conduit for transactions devoid of speculative motives. In the year 2022 alone, the stablecoin market achieved an astonishing transactional value exceeding $11 trillion. To put this staggering figure into perspective, it nearly matches the annual transaction volume of payments juggernaut Visa, which recorded $11.6 trillion during the same period. Notably, this also overshadowed the transaction figures reported by PayPal and Mastercard, standing at $1.4 trillion and $6.57 trillion, respectively.

However, an important distinction must be made when interpreting these figures. High-volume securities traders are less likely to employ Visa for transactions, whereas a substantial portion of stablecoin transactions involve financial activities. Despite this discrepancy, the substantial figures underscore the rapid rise of stablecoins in the payments ecosystem and shed light on PayPal’s strategic interest in issuing its own stablecoin, considering its $1.4 trillion transactional activity.

Central to the report’s findings is the analysis of blockchain transactions, revealing a weekly engagement of approximately five million active stablecoin addresses. Impressively, three-quarters of these addresses handle transactions less than $1,000 per week, indicating that small-scale and retail users are likely the driving force behind stablecoin adoption. While a significant portion of these transactions pertains to financial dealings rather than real-world applications like peer-to-peer payments, evidence suggests a growing presence of the latter.

However, it’s important to acknowledge a potential caveat regarding retail transactions – the data’s accuracy hinges on the exclusion of voluminous questionable transactions.

Of paramount importance is the finding that stablecoin transaction volumes have experienced a mere 11% decrease since the end of 2021. This contrasts starkly with centralized exchange volumes, which plummeted by 64%, and decentralized exchange volumes, witnessing a 60% decline. This trend aligns with the soaring popularity of self-hosted wallets, reaching an all-time high, while exchange and smart contract holdings plunged by 40% from their peaks.

Brevan Howard’s report predominantly presents observations, refraining from definitive interpretations. One such observation highlights that Circle claims more than 70% of USDC (USD Coin) is held outside the United States, a proportion likely even higher for Tether. This assertion is reinforced by the substantial dominance of the Tron blockchain in stablecoin transactions.

A central enigma arises from the overwhelming dominance of the Tron blockchain and its connection with Tether in stablecoin transactions. The report unveils that Tron and Binance Smart Chain (BSC) collectively account for a staggering 75% of stablecoin transactions and 41% of associated volumes. An intriguing pattern emerges – while most chains, excluding Tron and BSC, predominantly employ USDC, Tron and BSC heavily lean towards Tether. This divergence may be explained by USDC’s association with Coinbase, while Tron and BSC are affiliated with other exchanges. Tron’s founder, Justin Sun, is linked with Poloniex and Huobi exchanges.

The astonishing amount of Tether issuance on Tron, totaling nearly $43 billion or 52% of all USDT stablecoins, raises questions about its origin and purpose. Some speculate that the large Tron Tether balance is connected to a substantial Chinese user base, a claim Sun himself has made.

However, it’s vital to note that Justin Sun has faced legal action from the United States Securities and Exchange Commission (SEC), which not only considers TRX a security but also accuses Sun of manipulative wash trading of TRX to inflate its market appearance. Given that stablecoin transactions often involve these assets, concerns arise about the potential inflation of stablecoin transaction volumes and the veracity of these allegations.

In conclusion, the Brevan Howard report offers a comprehensive analysis of the stablecoin landscape, shedding light on its remarkable ascent as a vehicle for non-speculative transactions. While the prominence of Tron raises questions about the reliability of the data, the overarching trend of stablecoins as a formidable force in payments remains undeniable.

Join us on Telegram